Global Fertilizer Outlook - 3

Potash Market Sees Oversupply, Growing Demand

Potash supply is forecast to be more than the demand for the fertilizer from 2016 to 2020. Both supply and demand are expected to grow in the coming years. (Graphic courtesy of Kevin Stone, Natural Resources Canada)

FORT LAUDERDALE, Fla. (DTN) -- The global potash fertilizer outlook expects demand and supply to grow in the coming years, but perhaps a little slower than in recent years.

The potash market has been in an oversupply situation in 14 of the last 15 years, but demand for the nutrient has also risen ever year during that 15-year window, noted Kevin Stone, senior adviser with Natural Resources Canada. He gave the potash outlook at the 2016 Fertilizer Outlook and Technology Conference held in mid-November in Fort Lauderdale, Florida.

DEMAND, SUPPLY GROWING

The world consumption of potash is 32 million metric tons (mmt) for 2015, up slightly from previous years. World production of potash is just about 36 mmt for the same year. Despite overproduction, the potash market is operating as it has for all but one of the last 15 years, said Stone.

"Demand fundamentals are not that bad despite the oversupply situation," Stone said. "The bottom line is both demand and supply will grow over the next few years, but perhaps just a slower pace."

Demand for potash is expected to grow at around 2.3% per year between 2016 and 2020. Demand could grow to about 36.5 mmt in 2020, up from the 32.7 mmt in 2015, he said.

Supply growth is also expected to increase 2.5% per year for that same time period, Stone said. Supply could jump from 36.6 mmt in 2015 to 43.3 mmt in 2020, he said.

Demand for potash globally is being pushed by several different factors, Stone pointed out. The global population continues to increase, and could be 9.7 billion by 2050; meanwhile, there is 46% less arable land around the world compared to 1961.

"We have seen no increase in land since 1980, but we are producing much more food than back then today," he said. "Grain production is growing and potash is needed to produce these crops."

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Cereals (corn, rice, wheat) and oilseeds (soybeans, palm oil, etc.) consumed about 57% of the global potash use in 2010/2011. Potash is also extremely important in the production of fruits and vegetables, Stone said.

K IN CHINA

Stone took a closer look at some of the important countries for both consumption and production.

Any fertilizer outlook regarding consumption and production has to begin with China. Much like in phosphorus production, China has increased potash production considerably over the last five years.

In 2010, China produced about 5 mmt of potash; in 2015, the country produced just under 11 mmt of the nutrient. Potash consumption in the nation has also risen in that time, from 4 mmt in 2010 to closer to 5 mmt in 2013.

Stone said China uses about 60% of the potash production for domestic use while the remaining 40% is exported. Chinese potash production could tail off some in 2016, but is forecast to recover to the 11 mmt level again for 2017 to 2020.

Chinese domestic demand for potash will continue a slight increase in the next five years as well, he said.

The U.S. is not increasing potash production within the country, with consumption on a slightly increasing trend. The U.S depends mainly on imports for its supply of potash, he said.

Brazil and India are other important countries that consume large amounts of potash. Brazil is increasing potash usage in recent years, while consumption in India fell because Indian farmers are receiving less subsidies, Stone said.

CANADA KEY SUPPLIER

Canada remains the major supplier of potash to the global market; 95% of its production is exported. Half of Canada's potash exports go to the U.S. and the other half goes to the rest of the world, he said.

Canada produced 10.8 mmt of potash in 2014 and estimates for 2015 put production at 11.3 mmt. The supply outlook for Canada is for slightly higher production, Stone said.

Russia is another big potash producer on the world market. Roughly 80% of Russian's potash production is exported. Russia potash production in 2016 should be about 6 mmt, which would be just slightly lower than 2015.

Production from 2017 to 2020 could increase, because Russian potash facilities are operating at 90% of capacity versus Canada's at only 65%. The global operating rate is forecast to be lower than 80% of capacity in the years between 2016 and 2020; the rate from 2010 to 2015 was 86%, he explained.

Other countries important in the supply side of the global potash market include Belarus, Israel and Germany.

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